TSX barely lower as investors look towards G20

BNN Bloomberg's closing bell update: June 24, 2019

TORONTO - North American stock markets started the week flat amid geopolitical events including an upcoming trade meeting between the presidents of the U.S. and China.

“After a rather strong week last week we're seeing a breather today,” says Craig Fehr, a Canadian markets strategist with Edward Jones.

“This is a reflection of certainly some of the gains that we've seen so far in June but I think also some of the caution that exists ahead of what are some building geopolitical tensions between the U.S. and Iran as well as the impending G20 meeting.”

Iran is getting more immediate attention with U.S. President Donald Trump on Monday imposing stricter sanctions after blaming Iran for shooting down a U.S. surveillance drone and his aborted retaliatory strike against the Middle Eastern country. But Fehr said the more impactful event for the economy and financial markets is going to be what transpires from the G20 meeting this week between Trump and Chinese president Xi Jingping.

A deal isn't expected to come out of the meeting and investors are taking a wait-and-see approach given that the meeting takes place between earnings seasons and the release of economic data.

The S&P/TSX composite index closed down 1.96 points to 16,523.47.

Four of the 11 major sectors were higher, led by materials, which rose about two per cent primarily due to higher gold prices resulting from a weaker U.S. dollar and the precious metal's attractiveness as a safe haven for investors.

Barrick Gold Corp. was the leading gold name, gaining more than four per cent.

“To the extent that there's a bit of nervousness around the uncertainty of what might transpire between the U.S. and Iran, gold prices are the beneficiary of that as investors seek to find a little bit of safety in portfolios.”

The August gold contract was up US$18.10 at US$1,418.20 an ounce, the highest level in almost six years after increasing about 10 per cent in the last month. The July copper contract was up 0.1 of a cent at US$2.71 a pound.

Technology lost nearly one per cent, followed by industrials, consumer discretionary and energy.

Energy fell despite crude oil prices rising to its highest level in nearly a month as Frontera Energy Corp and Encana Corp. were down 3.76 and 3.22 per cent respectively.

The August crude contract was up 47 cents at US$57.90 per barrel and the August natural gas contract was up 11.5 cents at US$2.28 per mmBTU.

While markets were basically flat, there was definitely a cautious tilt as the best performers outside of materials were defensive sectors like communications and consumer staples while cyclical sectors were down the most.

The Canadian dollar traded for an average of 75.79 cents US compared with an average of 75.69 cents US on Friday.

In New York, the Dow Jones industrial average was up 8.41 points at 26,727.54. The S&P 500 index was down 5.11 points at 2,945.35 while the Nasdaq composite was down 26.01 points at 8,005.70.

Fehr expects equity markets will climb in “fits and starts” in coming sessions after several of them breached all-time highs.

“I don't think that investors should expect the second half of the year to produce the same type of gains that the first half did but I think it's reasonable that equities could continue to do fairly well over the course of the year, I just think the ride's going to be much more bumpy.”

Even though there are longer-term challenges for his company, and some small businesses may not survive the pandemic, the outlook isn’t gloomy for everyone. Some experts say businesses could emerge stronger than before, and new waves of innovation could transpire.

After rolling out trillions of dollars worth of measures to prevent their economies and markets from collapsing, they are now doubling down with even more spending to backstop a recovery as coronavirus lockdowns ease.